The corporate landscape is facing a dual challenge: the necessity of genuinely addressing Environmental, Social, and Governance (ESG) concerns, and the imperative to recognize the evolving preferences of younger generations. A deep dive into recent corporate practices suggests a significant disconnect between what brands say they are doing and what they are actually implementing.
The Misalignment with Younger Generations
A core finding from a recent survey, which was also supported by academic journals, highlights a major gap: brands do not recognize the preferences of the younger generations.
Shockingly, very few brands actually take that into account.
In an era where younger consumers are increasingly basing their purchasing decisions on a company’s values, sustainability efforts, and social impact, this oversight is a critical strategic blunder. Failing to align with the values of future consumers and employees is a clear path to long-term irrelevance.
ESG: Strategy vs. Report
While the topic of ESG is ubiquitous in boardrooms, the implementation often falls short of genuine commitment. Companies are indeed producing ESG materials:
They will have a section on ESG in their annual reports.
They will even have an ESG report.
However, the key distinction is that their ESG report is a report, not an ESG strategy.
They are not doing real ESG implementation.
The effort appears to be centered on performing the bare minimum—perhaps pleasing their shareholders and maybe inflating asset prices. Beyond that, they’re not doing anything.
The Critical Internalization of Risk
The most telling sign of whether a company’s ESG commitment is genuine lies in its risk assessment, found within the annual report.
When looking at the risk statements in a company’s annual report:
If a company is not actively managing ESG matters, they will call it as external risk.
If a company is implementing ESG, then social and environmental risks cannot be external risks.
True ESG implementation means treating these risks as internal.
The practice of categorizing social and environmental risks as purely “external” suggests a lack of active management or integration into core business operations and strategic planning. This is a pattern you will see that a lot among many listed companies.
The Path to Genuine Change
To thrive in the coming decades, companies must move past the performative nature of ESG reporting and make these values integral to their operations.
Internalize ESG Risk: Reclassify social and environmental matters from external risks to internal, manageable business risks. This forces the creation of strategies and operational changes to mitigate them.
Move from Report to Strategy: An ESG report is a historical document; a strategy is a roadmap. Companies need to shift their focus to real ESG implementation.
Prioritize Youth Preferences: Acknowledge that the preferences of the younger generations are a critical driver of future success. Integrate these values into product development, marketing, and corporate purpose to secure market share and talent.
The time for viewing ESG as a compliance exercise or a PR tool is over. Authentic, internalized commitment is the new standard for corporate legitimacy.
